FinTech’s Personal Loan Market Share Has Doubled Since 2015
Ever since the Great Recession, peer to peer lenders and other FinTech alternatives have emerged to offer consumers personal loans. While such startups have gained notoriety in certain circles, it’s fair to say that few have become household names. Nevertheless it seems that these types of lenders are growing significantly. According to a new report from Experian, FinTech lenders have doubled their share of the personal loan market in just the past few years.
In their latest FinTech Marketplace Trends Report, Experian found that FinTechs held a 49.4% marketshare compared to traditional lenders. That’s significantly higher than the 22.4% share they held back in 2015. Similarly the number of unsecured personal loans being issued each month has risen sharply over the past four years, reaching 1.3 million for March 2019 compared to just 656,000 in March 2015.
Interestingly, while FinTechs lending stats are climbing elsewhere, the average size of their loans seems to be shrinking. Experian reports that such loans reached a peak of nearly $12,000 in 2016 but the average has since fallen to $5,548. Notably that figure comes in below the $7,383 average found among traditional lenders.
Also on the decline is the average credit score of FinTech borrowers. Sitting at 650, the latest report shows an average 10 points lower than it was in 2016. The new number nearly matches the 649 average of traditional lenders — which marks a one point increase from three years ago. Incidentally that near-prime average also represents the only category of consumer that favors FinTechs over other lenders. While 27.8% of these near-prime borrowers choose traditional lenders, 33.6% choose FinTech alternatives. Conversely traditional lenders were more popular than FinTechs among prime (35.9% to 35.3%), super prime (6.8% to 5.5%), and subprime (26.5% to 24.6%) borrowers.
As far as delinquencies go, the two types of lenders were in line with each other. The study found that 5.7% of personal loans from traditional lenders were 90 days or more past due compared to 5.4% of FinTech loans. However, while that marks a 46% year over year increase for the former, it’s actually a 2% decline for the latter.
Commenting on the FinTech Marketplace Trends Report’s findings, Experian’s VP of Analytics and Business Development Michele Raneri said, “We know unsecured personal loans represent the largest product offering in the FinTech industry and our report reveals continued growth in this area over the last four years.” She went on to add, “We believe significant changes in the financial profile of FinTech borrowers and an increase in adoption from younger consumers is fueling this growth.”
Obviously it’s not a huge revelation that FinTech lenders continue to grow. That said Experian’s report does highlight some intriguing information about how the landscape of alternative lenders is changing. Therefore it will be interesting to see how loan sizes, credit markets, and delinquencies are affected in the coming years — especially with a potential recession up ahead.
Also published on Medium.